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 Insurance
Definitions
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- Cafeteria Plan: Generic term for an
employee benefit plan that allows employees to
select among the various group life, medical
expense, disability, dental, and other plans
that best meet their specific needs.
- Calendar-year Deductible: Amount
payable by an insured during a calendar year
before a group or individual health insurance
policy begins to pay for medical expenses.
- Cancelable: A contract of health
insurance that may be cancelled during the
policy term by the insurer or insured.
- Cancellation: The discontinuance of
an insurance policy before its normal expiration
date, either by the company or the insured.
- Captive Insurer: Insurance company
established and owned by a parent firm in order
to insure its loss exposures while reducing
premium costs, providing easier access to a
reinsurer, and perhaps easing tax burdens.
- Capitation: In managed-care plans, a
system of prepaying doctors and hospitals a set
of fee to provide health care for each enrollee,
without regard to the type or number of services
rendered.
- Cargo Insurance: Type of ocean marine
insurance that protects the shipper of the goods
against financial loss if the goods are damaged
or lost.
- Cash Surrender Value: The amount
available in cash upon voluntary termination of
a policy by its owner before it becomes payable
by death or maturity.
- Casualty-Insurance: Insurance
concerned with the insured's legal liability for
injuries to others or damage to other persons'
property; also encompasses such forms of
insurance as plate glass, burglary, robbery and
workers' compensation.
- Catastrophe: Event which causes a
loss of extraordinary magnitude, such as a
hurricane or tornado, earthquake.
- Causes-of-loss Form: Form added to
commercial property insurance policy that
indicates the causes of loss that are covered.
This term replaces the old term "Perils".
- Cede: To transfer all or part of a
risk written by an insurer (the ceding, or
primary company) to a reinsurer.
- Certificate of Insurance: A statement
of coverage issued to an individual insured
under a group insurance contract, outlining the
insurance benefits and principal provisions
applicable to the member.
- Certified Financial Planner (CFP):
Professional who has attained a high degree of
technical competency in financial planning and
has passed a series of professional examinations
by the College of Financial Planning.
- Certified Insurance Counselor (CIC):
Professional in property and liability insurance
who has passed a series of examinations by the
Society of Certified Insurance Counselors.
- Change of Occupation Clause:
Provision in a health insurance policy
stipulating that if the insured changes to a
more hazardous occupation, the benefits are
reduced based on the amount of benefits the
premium would have purchased for the more
hazardous occupation.
- Chartered Financial Consultant (ChFC):
An individual who has attained a high degree of
technical competency in the fields of financial
planning, investments, and life and health
insurance and has passed ten professional
examinations administered by The American
College.
- Chartered Life Underwriter (CLU): An
individual who has attained a high degree of
technical competency in the fields of life and
health insurance and who is expected to abide by
a code of ethics. Must have minimum of three
years of experience in life or health insurance
sales and have passed ten professional
examinations administered by The American
College.
- Chartered Property and Casualty
Underwriter (CPCU): Professional who has
attained a high degree of technical competency
in property and liability insurance and has
passed ten professional examinations
administered by the American Institute for
Property and Liability Underwriters.
- Claim: A request for payment of a
loss which may come under the terms of an
insurance contract.
- Claims Adjuster: Person who settles
claims: an agent, company adjuster, independent
adjuster, adjustment bureau, or public adjuster.
- Claim-made policy: A liability
insurance policy under which coverage applies to
claims filed during the policy period.
- Class Rating: Rate-making method in
which similar insured's are placed in the same
underwriting class and each is charged the same
rate.
- Coinsurance: 1) A provision
under which an insured who carries less than the
stipulated coverage percentage of insurance to
value, will receive a loss payment that is
limited to the same ratio which the amount of
insurance bears to the amount required; 2)
a policy provision frequently found in medical
insurance, by which the insured person and the
insurer share the covered losses under a policy
in a specified ratio, i.e., 20 percent by the
insured and 80 percent by the insurer.
- Collision Insurance: Protection
against loss resulting from any damage to the
insured policyholder's car caused by collision
with another vehicle or object, or by upset of
the insured car, whether it was the insured's
fault or not.
- Combined Ratio: A measure of the
relationship between dollars spent for payment
of claims and expenses and premium dollars taken
in; more specifically, the sum of the ratio of
losses incurred to premiums earned and the ratio
of commissions and expenses incurred to premiums
written. A ratio above 100 means that for every
premium dollar taken in, more than a dollar went
for losses, expenses, and commissions.
- Commercial General Liability Policy (CGL):
Commercial liability policy containing two
coverage forms-an occurrence form and a
claims-made form.
- Commercial Lines: Insurance for
businesses, organizations, institutions,
governmental agencies, and other commercial
establishments.
- Commercial-Multiple-Peril-Policy: A
package of insurance that includes a wide range
of essential coverage's for the commercial
establishment.
- Commercial Package Policy (CPP): A
commercial policy that can be designed to meet
the specific insurance needs of business firms.
Property and liability coverage forms are
combined to form a single policy.
- Commission: The part of an insurance
premium paid by the insurer to an agent or
broker for his services in procuring and
servicing the insurance.
- Commissioner: A state officer who
administers the state's insurance laws and
regulations.
- Common Stock: Securities that
represent an ownership interest in a
corporation.
- Company Adjuster: Claims adjuster who
is a salaried employee representing only one
company.
- Comparative Negligence: Under this
concept a plaintiff (the person bringing suit)
may recover damages even though guilty of some
negligence. His or her recovery, however, is
reduced by the amount or percent of that
negligence.
- Completed Operations: Liability
arising out of faulty work performed away from
the premises after the work or operations are
completed. Applicable to contractors, plumbers,
electricians, repair shops, and similar firms.
- Comprehensive Automobile Insurance:
Protection against loss resulting from damage to
the insured auto, other than loss by collision
or upset.
- Comprehensive Major Medical Insurance:
A policy designed to give the protection offered
by both a basic and a major medical health
insurance policy. It is characterized by a low
deductible amount, a coinsurance feature, and
high maximum benefits.
- Comprehensive Medical Expense Insurance:
A form of health insurance which provides, in
one policy, protection for both basic hospital
expense and major medical expense coverage's.
The major medical part of a comprehensive policy
is characterized by a deductible amount,
coinsurance, and high maximum benefits.
- Comprehensive Personal Liability
Insurance: Protection against loss arising
out of legal liability to pay money for damage
or injury to others for which the insured is
responsible. It does not include automobile or
business operation liabilities.
- Compulsory Auto Liability Insurance:
Insurance laws in some states required motorists
to carry at least certain minimum auto
coverage's. This is called "compulsory"
insurance.
- Compulsory Insurance: Any form of
insurance which is required by law.
- Concealment: Deliberate failure of an
applicant for insurance to reveal a material
fact to the insurer.
- Conditional Receipt: A receipt given
for premium payments accompanying an application
for insurance. If the application is approved as
applied for, the coverage is effective as of the
date of the prepayment or the date on which the
last of the underwriting requirements, such as a
medical examination, has been fulfilled.
- Conditions: Provisions inserted in an
insurance contract that qualify or place
limitations on the insurer's promise to perform.
- Confining Sickness: An illness that
confines an insured person to a hospital or an
insured's persons home.
- Conservation: The attempt by the
insurer to prevent the lapse of a policy.
- Consideration: One of the elements
for a binding contract. Consideration is
acceptance by the insurance company of the
payment of the premium and the statement made by
the prospective policyholder in the application.
- Consideration Clause: The clause that
stipulates the basis on which the company issues
the insurance contract. In health policies, the
consideration is usually the statements in the
application and the payment of premium.
- Consequential Loss: Financial loss
occurring as the consequence of some other loss.
Often called an indirect loss.
- Contingent Beneficiary: The person or
persons designated to receive the benefits of a
policy or plan if the primary beneficiary dies
while the insured is living.
- Contingent Liability: Liability
arising out of work done by independent
contractors for a firm. A firm may be liable for
the work done by an independent contractor if
the activity is illegal, the situation does not
permit delegation of authority, or the work is
inherently dangerous.
- Contract: A binding agreement between
two or more parties for the doing or not doing
of certain things. A contract of insurance is
embodied in a written document called the
policy.
- Contractual Liability: Legal
liability of another party that the business
firm agrees to assume by a written or oral
contract.
- Contributory Negligence: Negligence
of the damaged person that helped to cause the
accident. Some states bar recovery to the
plaintiff if the plaintiff was contributorily
negligent to any extent. Others apply
comparative negligence.
- Conversion Privilege: A privilege
granted in an insurance policy to convert to a
different plan of insurance without providing
evidence of insurability.
- Convertible Term Insurance: Term
insurance which can be exchanged, at the option
of the policyholder and without evidence of
insurability, for another plan of insurance.
- Coordination of Benefits (COB): The
mechanism used in group health insurance to
designate the order in which the multiple
carriers are to pay benefits and to prevent
duplicate payments.
- Copayment: A fee to patients-usually
$5 to $15-for doctors visits or medical
services.
- Cost Basis: An amount attributed to
an asset for income tax purposes; used to
determine gain or loss on sale or transfer; used
to determine the value of a gift
- Cost-of-Living Rider: Benefit that
can be added to a life insurance policy under
which the policy owner can purchase one-year
term insurance equal to the percentage change in
the consumer price index with no evidence of
insurability.
- Coverage: The scope of protection
provided under a contract of insurance; any of
several risks covered by a policy.
- Covered Expenses: Hospital, medical,
and miscellaneous health care expenses incurred
by the insured that entitle him/her to a payment
of benefits under a health insurance policy.
Found most often in connection with major
medical plans, the term defines, by either
description, reasonableness, or necessity to
specify the type and amount of expense which
will be considered in the calculation of
benefits.
- Covered Participant: A person covered
by a pension plan is one who has fulfilled the
eligibility requirements in the plan, for whom
benefits have accrued, or are accruing, or who
is receiving benefits under the plan.
- CPCU: See Chartered Property
and Casualty Underwriter.
- Credit Health Insurance: A form of
health insurance on a borrower, usually under an
installment purchase agreement. The benefits
cover the obligations of the borrower and are
payable to the creditor.
- Crop-hail Insurance: Protection
against damage to growing crops as a result of
hail or certain other named perils.
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